Thursday, May 5, the New York Stock Exchange experienced its worst session since March 2020, at the start of the Covid-19 pandemic. The Nasdaq, which includes technology stocks, even recorded the third most spectacular fall in its history, with a loss of 4.99%. Worried by the prospect of a tightening of monetary policy by the American central bank (Fed), technology and growth stocks were the first to come under fire from investors, like eBay (-11.72 %), Snap (-9.58%), Tesla (-8.33%), Amazon (-7.56%), Meta (-6.77%), Apple (-5.57%), or even Alphabet (-4.76%) and Microsoft (4.36%).
The only ray of sunshine in this storm: Twitter, whose value swelled by 2.56%, to $50.56 per share, at the close. At issue: the announcement by Elon Musk, its future owner, of raising funds of 7.14 billion dollars (6.76 billion euros) to finance the takeover, which was accepted by the Board of administration of the social network on April 24.
Prestigious investors who reduce Musk’s loan and inspire confidence
In a document sent Wednesday to the American stock market policeman, the SEC, the boss of Tesla and SpaceX names a total of 19 investors who have agreed to contribute to the acquisition of the social network. Among them, the co-founder of Oracle Larry Ellison (for 1 billion dollars), the prince and Saudi businessman Al-Walid ben Talal, the tech investment fund Sequoia Capital (to the tune of 800 million dollars), Vy Capital (for 700 million dollars), or the Binance cryptocurrency exchange platform (500 million).
Prince Al-Walid bin Talal will for his part make available nearly 35 million of his Twitter shares (i.e. $1.9 billion), once the takeover is finalized, in order to retain a stake in the capital of the company, because Elon Musk wants to remove Twitter from the New York Stock Exchange when he takes control.
These financial contributions will allow the richest man in the world to reduce the amount of his margin loan contracted with Morgan Stanley and other financial institutions, reducing it from 12.5 billion dollars to 6.25 billion . A margin loan allows a borrower to increase their credit by pledging assets as collateral. Either Tesla shares for Elon Musk.
At the same time, the share of the acquisition of Twitter financed in shares and in cash by Elon Musk and the list of investors will rise to 27.25 billion dollars, against 21 billion previously. And it may not be over: the entrepreneur has indicated to the American stock market policeman, the SEC, that he continues to seek other sources of financing from shareholders.
Twitter has gained 22% since April 4, Nasdaq has lost 15%
For Dan Ives and John Katsingris of Wedbush Securities, quoted by AFP, this new development is “a smart and strategic financial decision by Mr. Musk that will be welcomed at all levels and shows that the acquisition of Twitter is on track to be finalized by the end of the year“.
Elon Musk is expected to serve as interim CEO of Twitter for a few months once the acquisition is complete, according to a CNBC report. If this scenario takes place, Musk will replace Parag Agrawal, who has led the company since November and succeeded Jack Dorsey after the latter left at the end of 2021.
Since April 4, the date of the announcement of Elon Musk’s surprise capital increase, Twitter shares have taken nearly 22% on the stock market, and have remained stable since the takeover was accepted at the end of April. Meanwhile, the Nasdaq has lost 15% since April 4. Twitter’s progress in an unfavorable context is therefore to be credited to Elon Musk’s offensive.
Paradoxically, the fact that a notorious libertarian, supporter of minimal moderation on social networks, takes control of a media despite the obvious conflict of interest vis-à-vis his own activities (Tesla and SpaceX) , and despite the fact that regulation everywhere in the world is moving in the direction of imposing more moderation on platforms, does not seem to make the markets doubt.
A vague project that does not worry investors
Regarding freedom of expression, which the billionaire wants to “liberate” on the social network “while respecting the law”, she room for maneuver actually seems very limited according to the lawyers consulted by The gallery. While Musk has made the subject the heart of his new project, he could actually change things only in the small space between what the network’s current terms and conditions (TOS) prohibit, and the limits of the law.
In other words, the businessman could only modify the posture of Twitter on a handful of questions, and in particular that of disinformation – although it is also framed by law. But he will still have to moderate most of the comments that are currently problematic on the social network, under penalty of sanctions that can go, in the EU, up to 6% of the company’s worldwide turnover once the Digital Services Act (DSA), which has just been adopted in Brussels, will be in force.
Elon Musk benefits above all from his image, that of a visionary and daring entrepreneur, who has managed to launch several companies that have become spectacular worldwide successes. And it does not matter, finally, if the project which it announces will be almost impossible to carry out because of the constraints of the law.
Investors are also confident in Musk’s ability to better monetize Twitter. The announcement, made earlier this week, to make the social network pay for brands wishing to communicate on it, is a track that has been well received by investors and analysts.